– In my last royalty statement, December 2009, digital book sales (all formats, including Kindle) totaled…. ready?… a mere 1.6% of total units sold.

My own book has been on the bestseller lists for more than three years, and I’ve tracked most multi-month bestsellers for all of those 36+ months using Nielsen Bookscan (among other tools) which covers about 75% of all retail book sales since 2001, including Amazon but excluding discount clubs such as Sam’s Club. Titlez has also been useful for looking at detailed trending on Amazon.

This all gives me a good pool of data, and I feel like I have a good grasp of what authors are selling and… realistically earning directly from books. If you’d like to get a basic idea, just subscribe to Publishers Lunch to see what authors are getting paid as advances. Enjoy.

We’ll come back to the Kindle numbers, but first, here’s a sketch of book economics, incentives and options:

– For a hardcover book, authors typically receive a 10-15% royalty on cover price. This means that for a $20 cover price, the author will receive $2-3. If you have a $50,000 advance, a $20 cover price, and a 10% royalty, you therefore need to sell 25,000 copies (“earn out” the advance) before you receive your first dollar beyond the advance. This is the basic rule, but several quietly aggressive outfits — both Barnes and Noble’s in-house imprint (Sterling, acquired in 2003) and Amazon’s in-house print arms, AmazonEncore and AmazonCrossing — could prove to offer more attractive terms. Then there are the fascinating rogues like Andrew “The Jackal” Wylie.

– For a trade paperback book, authors typically receive around half the royalty of a hard cover. If you are making 15% on your hardcover, you might get 7.5% when it goes to paperback. Guess what? This means you now need to sell twice as many books to break even. I think going to paperback is a bad idea for almost all authors, unless you want to double your work for the same income. Do you really need the people who won’t buy a $20 book hardcover that’s already discounted to $12-14 dollars through Amazon or Barnes and Noble? I don’t think so, yet most authors follow the hardcover-to-paperback progression without question.

– Electronic books, including Kindle, do not count towards the most famous bestseller lists, such as The New York Times bestseller list. I suspect this will change within the next two years, but for now: print is what will make you famous in the mainstream.

– If you choose to self-publish but stick with print format and retail distribution, you might double your royalty earnings. This is based on conversations with friends who own their own boutique publishing houses, all of which have distribution in large chains like Barnes and Noble. It’s fun to imagine that you could print a book with a $20 cover price and pocket $15, but that isn’t how the math works out. Once you factor in retailer discounts and distributor percentages, you might end up netting 30% of cover price vs. 15%, if you’re lucky and have a print run of 20,000+ units (Can you afford the upfront cost, especially if retailers are paying net-30, net-60, or beyond?). Keep in mind you also need to manage things as a publisher, which could make your dollars-per-hour earnings less than with a traditional publisher. There are a few promising companies, like Author Solutions, trying to solve this problem for authors.

– If you choose to go digital only as an e-book, this is where profit rules and amazing numbers can be achieved. How amazing? I know one man who nets between $5,000,000 and $10,000,000 per year with a single e-book and affiliate cross-selling to his customer lists. I’m not kidding. The downside is that you need to be a world-class marketer and understand affiliate and CPA advertising better than anyone else in your niche (since there is little barrier to entry, and therefore plenty of competition). Prepare to be an uber-competent CEO or fail if you choose this option.

The Kindle Phenomenon — How Press Releases Are Misread

Amazon is incredible and I expect nothing but more innovation from them. Putting aside their coming bloodbath with Apple, though…

1) Kindle books selling well does not mean that print books are selling poorly. In fact, it appears quite the opposite. From the Wall Street Journal coverage of the announcement:

Still, the hardback comparison figure doesn’t necessarily mean the end is near for paper books. Amazon said its hardback book unit sales also continued to increase.

It will be fun to see more precise Kindle sales when they are shown as a separate line item in Nielsen Bookscan, which should happen in the next year.

2) The top-five Kindle selling authors of all-time, over 500,000 copies each, are all fiction writers (including Stieg Larsson, Stephanie Meyer, and others). In the top-50 Kindle bestsellers right now, I counted just three (3!) non-fiction books. If you’re a non-fiction author, I’d think carefully before jumping the gun to all digital. Remember that comment about print being dead? What if we ask a high-level exec at one of the “Big Six” (explained later) about how print sales are declining?

Hardcover trend is mixed and dependent on hot books. If you are wondering about ebooks, commercial fiction is where you’re seeing the erosion. Paperbacks are ok. Mass markets are taking a hit.

Mass-market books are designed to fit into the racks set near the checkout counter at supermarkets, drugstores, hospital gift shops and airport newsstands. They are priced affordably so they can be bought on impulse. There are other production differences in binding and paper quality (historically, paperbacks were printed on “pulp” and could fit in the consumer’s pocket). The format is often used for genre fiction, science fiction, romance, thrillers and mysteries.

Is it a coincidence that print impulse purchases are also the biggest sellers on Kindle? I don’t think so.

3) I believe (conjecture, yes) that the figure we are missing is Books-Per-Person. If you have a Kindle, as I do, how many books did you buy in the first week or two? How many unread books do you have on your Kindle? Unlike with print books, you don’t have to look at a stack of unread material like undone homework. Ergo, you purchase more digital books than you would ever purchase in print. If Amazon is selling 180 Kindle books for every 100 print books, I wouldn’t be surprised if 10-20 people are responsible for the former, whereas 80-100 people are responsible for the latter. This reflects that Kindle owners are buying more books per capita, not that paper purchasers are buying fewer.

Now, don’t get me wrong. There has to be some cannibalization of sales, and much of print will die eventually, but it will take a long time. Print is far from dead… and far from unprofitable. Despite the industry-encouraged myth that print has no margins, a hardcover book sold for $20, assuming no graphics or color, can often be produced for less than $2 a copy. With the proper economies of scale (unavailable to most individuals), the publishing biz can be quite a little cash cow.

Let’s cover some basics of traditional publishing next.

What “Traditional” Publishing Looks Like

Traditional publishing looks something like the following for non-fiction authors. For fiction authors, you need to write the entire manuscript first. Here are the five steps:

Step 1. Get an agent (best done through a referral from one of their authors).

Step 2. Put together a book proposal, which is like a business plan. It will contain marketing plans, your existing “platform” (who you can sell to or reach without publisher help), an executive summary of the book concept, and 1-3 sample chapters, among other things.

Step 3. Pitch to specific editors at different publishers through the agent and schedule meetings.

Step 4. Sell the book. The editor will probably have signing authority up to a certain advance amount, but higher ups will need to sign off on larger advances. If you don’t have a great platform for selling books without publisher help, don’t expect anything more than $50,000, and that’s being optimistic. The $50,000 will not be paid all at once, but in several installments, something like this: 1/4 upon signing the deal, 1/4 upon publisher acceptance of manuscript, 1/4 upon publication, and 1/4 upon paperback publication (assuming you start with hardcover).

Step 5. Write the book. Keep in mind, you’re not getting paid the advance all upfront, and writing a good book will probably take at least a year if you’re hoping to have good word-of-mouth and some longevity. I’ve been working on my new book for more than three years. I’ve spent this time because I want it to sell like mad for no fewer than five years after publication, preferably more than a decade if I update it on an annual or semi-annual basis.

All of these publishers have iBook agreements with Apple except for one… Random House. Why? Is Random House just unable to see the obvious future? Nah, I don’t think that’s true. There are plenty of smart people working at Random House, and that includes their legal department.

The paragraph that follows is all hypothetical:

What might happen if the iBooks agreements of the other Big Five all have suspiciously similar terms? If there were a federal investigation, might that lead to charges of collusion among the publishers and have terrible financial consequences for an already fragile industry? It certainly would. By distancing themselves and coming in late to the game, Random House — again, hypothetically — would be playing a very smart hand, indeed.

For those of you who are devoted to your iPads (I do like mine), you can always use the Kindle app to read Random House books on them pretty screens.

So What Should Authors Do?

First off, writing books is a terrible revenue model for authors.

Precious few books sell more than 25,000 copies, so it’s unlikely you’ll make even $75,000 a year from book royalties. In rare cases, you might have a perennial bestseller, but this is less than 1% of all books sold and not a good bet to make.

There are still a few reasons you might consider writing a book and going through traditional channels:

– Speaking: Particularly in the business category, if you target your Fortune 500 audience well enough, you can stair-step your way into $20,000 per 60-minute keynote without needing a miracle. Hundreds, if not thousands, of authors earn this kind of money. The higher echelon can make $80,000 or more per speaking engagement. Needless to say, this adds up fast.

– Reputation and audience: Money is a means to something else. Not unlike wampum, income is traded for either a possession or an experience. If you use your book to build a reputation as a thought leader, and if you can establish a direct line of communication to intelligent readers (through a blog, for instance), it is possible to bypass income and get almost any experience for free or next-to-free. The middleman of currency is removed, and you also have access to things money can’t buy, whether it’s interesting people or unusual resources.

Though I have done high-level speaking and enjoy it with the right audience, I typically do fewer than a dozen engagements a year. I prefer to focus on connecting with my readers and having fun with cashless adventures.

How do you build a base of fans or supporters and build a high-traffic blog? Here are two detailed closely related case studies:

Reputation, at least in the mainstream and for the next few years, is difficult to build if you self-publish. In the below five-minute discussion, NY Times bestselling author Ramit Sethi and I discuss the pros and cons of self-publishing vs. getting a “real” publisher:

In Closing

For established and successful authors, like Seth Godin or Jim Collins, self-publishing in print or digital is a supremely viable option. Jim Collins self-published his last print book, How the Mighty Fall, and was featured on the cover of BusinessWeek magazine to help push it up the bestseller ranks. Seth could do the same.

Why is this possible?

Because they have incredible reputations that were built, in part, on top of the traditional publishing machine. The Big Six and their close cousins are in real trouble. Some of them might adapt (which will include massive lay-offs), but most will not. In the next few short years, there will also be many interesting publishing alternatives for aspiring authors.

But, all that said, there is still real value in having the rare stamp of approval that a “traditional” publisher provides. I don’t think this will change much in the next 12 months, perhaps even 24 months.

Now, a handful of first-time, self-published authors hit the New York Times list, that’s an entirely different story…

###

Recommended reading – Below are the three books I’ve suggested to a dozen or so aspiring-author friends. Almost half of them later hit the New York Times bestseller list. Reading these doesn’t guarantee that outcome, of course, but it will help:

“Tim, I have a question… Before I decided to self-publish, I got a couple decent offers from traditional publishers, but they all involved 10+ months of lag time between when everything is ready to actually print and when they would actually print. I’m not nearly patient enough for that much delay. Is the world of “real published authors” really limited to people who are comfortable waiting around a year for their book to manifest?”

My answer addresses a few other common questions I get:

Hi Jeff,

With the big boys, yep. That’s the lag time in production. I actually kind of like it. Allow me to explain:

It forces you to think about your material and attempt to make it perennial. Which advice will be obsolete in 12 months? Delete. Which advice would be obsolete in 24 months? That means it will only be good about 12 months after pub date. Delete.

I find that it helps refine your thinking, just as having the content in a fixed form (print) forces you to consider your writing and editing more seriously than if you could change it willy-nilly like a blog post. There are certainly benefits to the multimedia books on the horizon, but I wouldn’t call them “books”, and I think the bells and whistles of video, hyperlinks, etc. will be used to mask sloppy thinking as often, if not more often, than they will be used to create a more compelling argument or presentation. The wordsmithing and precision of the language will suffer with the crutches of embeddable video, etc. Will they make perfect sense for some books? Absolutely. Will they distract and detract from the flow of the prose, story, or argument in most cases? Absolutely.

To me, “timely” books are a bad bet for writers. If the content delivers value based on timing near recent events, other media have it beat. I think long-form books should have a longer shelf life, and therefore require harder thinking throughout the process to ensure the content has value 1 year, 5 years, even 10 years down the line.

Hope that helps!

Tim

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277 Replies to “How Authors Really Make Money: The Rebirth of Seth Godin and Death of Traditional Publishing”

Tim – thanks for the post. As an author of two books myself, I could not agree more with your post. Most people expect when the pop something on Amazon they will rapidly make a fortune – but few sell more than a few thousand copies. Even if you do hit it big, the money is not in the book itself – its the total package that sells.

Hey Tim I’m an aspiring fiction writer and was wondering how alot of the principle’s involved in building a comunity of fans applies to fiction writing. Could you point me in the direction of someone who could help me out?

I recently finished my first book on your suggestion I tried out Authorhouse. I signed up with them and then reviewed their publishing material and discovered it was going to end up being really expensive for what I needed. I have tried to contact Authorhouse numerous times by email and phone and they have agreed to refund my money but no one is actually refunding me my money. It is great that they agreed but it is very disappointing the service I am getting. I hate to post this on here, but I started this ocher a month ago and no one is making any attempt to help. My advice is to stay away from Authorhouse.

I have been working the past year on a fitness book. Right now, it’s about 400 pages. The research I’ve put into it is top of the line.

Despite all this work, I am leaning toward releasing it as an ebook on my own website. My projected price point is $37. Does this sound like a viable business model assuming my book is high quality? thx

Tim, love your work. This blog is VERY on point, except for isolated circumstances like me. I ROBBED one of the big 6! They gave me a QUARTERMILLION DOLLAR ADVANCE (basically at gunpoint). I should thank them for the iPad I’m typing this on, the car I’m driving, the RV I just bought, and my legend as (what publisher’s weekly calls me) the self publishing phenomenon. I’d love to collaborate with you on speaking engagements and other profitable projects. meanwhile, to all who aspire to win with books, Fcuk traditional publishing. Print and sell your own.

To Steve. re: your question about “how al ot of the principle’s involved in building a community of fans applies to fiction writing”… The two things (Writing & Building a community of fans), while important for the success of your brand, have nothing to do with one another. Writers are not supposed to be marketeers; that is, until the paradigm shift. Now, artists must also shamelessly market their wares, no matter HOW the old school did it. This may not apply to ALL situations, but it sure applies to writing and authoring books.

Now, with the advent of social media, yes, you can weave the two together. On my FB page, I sometimes get “fictional,” even adopting character dialog into my status updates. Certainly, if someone within your social media reach sees this they will want to connect with you. Some will want to jump right in and buy. Others fall into one of the “zones” that you must institute when establishing long-term branding.

Why limit yourself to blogging and community-building thru the written word? VIDEO IS HERE! OBAMA had over 2,000 vids to help him get into office. Tim likely has a lot thanks to all the press and news shows. I have a few hundred myself, tho I am a video producer, so that comes natural. But if you, the layman-author (just taking the lowest denominator/nothing personal) has a voice and if that voice has been called “important & relevant” by a number of people, you cannot help but to expand on your brand and your craft using the massively available vehicle we know as viral Internet Video.

@ Scott , I’m sorry about your dilemma at Authorhouse. I am NOT an advocate of P.O.D. “Print On Demand” and if you google me “Relentless Aaron” and “Self-Publishing” I write about this in my blogs. This advice I give to everyone, speaking or writing, and that is: expect to pay when you go POD. Pay to keep your rights; never pay AND give up your rights. That’s RAPE. You want a book published so you can say you’re an author? Go for it. Just expect to PAY. Now, if you do all the research and you’re ready to publish yourself, you can just get the pdf file to Jim @ ghsoho and they can print 50 copies for you. I’m sure you can move 50 copies easy. From there, print 50 more, or even 300. But, you will save a LOT of money doing it this way. To everyone going into the publishing game, print small quantities, sell them and establish an audience. THEN approach the PRESS/MEDIA. THEN get some video to support everything, THEN build MORE of an audience…all of this B4 you contact a publisher. I PROMISE YOU a publisher who’s hungry to make money will approach you. The Authorhouse way is slow, and costly. @Scott you will get your money back. Be aggressive, like your life depended on it. The energy you spent venting on this blog could’ve gone to better use. Don’t mean to be mean, but thats the truth.

Great article! Though I have both books in ebook format. The next few years for traditional publishing will be interesting. With this advent and acceptance of the ebooks, Im sure we will be privy to some incredible new talent!

I don’t know much about authorhouse but I do know I’d pick POD over having hundreds of books sitting in my garage any day.:) you will NOT get burned if you do it right, cut out the middleman and go with a vendor such as lightning source. not to mention they take care of fulfillment as well and most books nowadays are bought online.

Oh… Yeah… I think it is the best post on the blog to comment about how lively traditional publishing still is 🙂

I represent those not yet 1.6%, who try to increase the number, but can’t.

Just imagine, that you are sitting in your chair somewhere in perfect place, enjoying all positive sides of mobility and thinking how to change things (sure, for better). You come across one perfect in all aspects and fitting desired lifestyle book. E-book. For example, “The 4-Hour Workweek, Expanded and Updated” (Format: eBook, 352 pages; ISBN: 978-0-307-59116-6 (0-307-59116-6))

Sure, you are not pirate and go to Amazon to buy it (though it is much slower than thepiratebay or rapidshare). Stupid Amazon says “This title is not available for customers from your location in: Europe”. “Damn…” – you think – “Again this Amazon restrictions, but surely, there is normal place to buy books, apart from Amazon”.

You go to Barnes & Noble, and there is no restriction. Great! But “This title is unavailable to download.” message appears and then you receive e-mail message “If you received this email regarding your order for a Barnes & Noble eBook, please be advised that these purchases are limited to those customers physically located in the United States and Canada.” OK. Barnes & Noble loose my miserable $9 too…

May be ebooks.com? Yes, I have $22 to pay! Please give me a book! Easily. But “This book is only available to customers in the following countries: …” List includes Afghanistan and Western Sahara. But I can’t go (at the moment) to Western Sahara to buy a book. I want it here, in forgotten by gods land of Central Europe. And I’m not sure, whether I can download it in W.Sahara. It used to be desert at my school time …

So, if you want opinion, not story: remove these “old school” copyright restrictions, make it available everywhere and at least one person would be thankful 🙂

Excellent article! Such a terrific overview and the links/resources you provide will help any aspiring author who is serious about being successful. I am recommending it to all of my clients and followers!

Tim, I see that Borders has filed for bankruptcy and the New York Times now includes e-books on its bestseller list. Do these two changes since your original post make you recommend self-publishing now, or would you still recommend the publisher route for first-time authors who can obtain a respectable publisher?

I have been writing for many years now, and have had several of my works published. However the hardest part I always come to when I am writing, is getting it published. Most would say writers block, but I have had the hardest time getting my work published until I started self publishing my own work through a great resource I found. I found that their unique transfer software allows just about any body submit their books from any manuscript layout software they use. Soon enough they will then publish a book in trade quality from as many copies as you desire. It even takes only a week to get the published copies. Instantpublisher has saved me so many different troubles when it comes to writing.

Great post! “The middleman of currency is removed, and you also have access to things money can’t buy, whether it’s interesting people or unusual resources.” – this is true! My wife started a blog and it got us a house to live in two years on an island – FREE!

I’ve been writing for several years now and have only ever self published, in both paperback and eBook formats. I have to say that Tim has it pretty much about right. Whilst I wouldn’t stop selling eBooks, the paperbacks outsell them by 1000’s of % all the time. All five so far are non-fiction though and I do have a pretty good marketing mechanism for the health books as well as the online bookstores, in fact one of them is a best seller on both sides of the Atlantic. My next book though, will be fiction and I am in a dilemma about whether to see if I can find an agent and a publisher or whether to stick with self publishing. The market for the novel is the same as for the health books and therefore there is a certain sort of logic that might mean it would be better for me to self publish. Any suggestions would be gratefully received.

I know you don’t write fiction books, but can you offer a conjecture on what the “new market” means for novelists and short-story writers? Also, it’s so much harder for story writers to put up a so-called “platform.” Can you give an aspiring fiction author some hints and description of what this means, and how to alleviate the anxiety that comes with it?

I don’t think I’d be comfortable as a public speaker. In fact, I know I wouldn’t. I hope that as a fiction writer I wouldn’t have to give speeches, because I am very shy and not comfortable with face-to-face conversation. I have about half of a draft completed (not enough to sell yet, of course!), and I am only 15 🙂 Can you give some tips on what fiction writers can/should do with regards to (what is still the standard for us) traditional publishing, which still requires a lot of self-promotion and “Platform”?

I am a Greek that is trying to keep thinking positively and your book plays an important role on that.

I just wanted to tell you that your book provides great information and it actually changed my life. I know it seems to be a common comment but I wanted to thank you.

I read your book on September 2010. Since then my life changed radically: On Mars 2011, I started traveling around the world, discovering new cultures and thinking about my future.

My travel finished on September 2011 and then I decided to quit my high salary job in Paris, follow my passions and my dreams. I know, that also looks a little bit common but for me it was a real revolution. I was like the person you describe in your book but not anymore.

I decided to apply a new life philosophy. My current project is the following: Working on line, build my life on Chios, a Greek island, travel and be free to dream.

I am positive and I keep thinking positively even if Greece is in a big mess. I apply the low-information diet and I feel released because all other Greek people around me are sick but not me!

So thank you for the book and for the great information you provide through this blog.

I precisely desired to say thanks once again. I am not sure what I could possibly have tried within the absence of those ideas contributed by you relating to such a subject. It had become a distressing condition in my view, even so , being able to view the well-written tactic you processed it produced me to weep over joy. Very grateful for your guidance and believe you realize what an wonderful job you are doing instructing others with the aid of a internet web site. Most likely you haven’t come across any of us.

About six months ago I decided to experiment with online publishing using Kindle and Createspace (which distributes to B&N, Diesel, Kobi, iBooks, all those other e-readers).

I put up some old ebooks I wrote ages ago, got a cheap covers made for them and literally forgot about them. I had no interest in building a brand or a business around them (anymore), but they were good little ebooks.

Just got a cheque from Amazon for $102 (a hundred bucks is their min payment threshold) and my Smashwords balance is $165.

OBVIOUSLY not a fortune, but for ebooks that I did zero promotion for, didn’t build a platform for or do anything else except write and forget – that’s not bad.

Rinse and repeat…

Obviously for my own book (Lucky Bitch), I’m basing it on a brand and a platform as well as having higher priced back end services. At this stage, I’m not interested in investing the time in writing a book proposal – but I’m building my platform so I could possibly interest someone in the future.

I’ll check in in another six months to see if I’ve been able to grow that Kindle balance exponentially with more books.

Thanks so much for all the info. Book publishing always seemed like some big secret that I just couldn’t seem to learn. Self-publishing seems the most profitable and “automate-able” but hard as hell to market. Would you think that selling an ebook ($20) on a sales copy website to be a good idea? This way it could be automated, and you would retain (almost) full profit? Possibly use adwords and such to generate traffic?

I have a non-fiction book, been stuck with it for a while as I was unsure what the hell to do, you helped allot tho, thanks!

I am in the midst of reading the 4 hour work week (by the way, why the number for? Is it arbitrary?), so I tried to visit http://www.pxmethod.com to improve my reading speed and the link is broken. Does anyone know of a resource that I can tap into that can help improve my reading speed? The link “www.pxmethod.com” is quoted in the middle of p. 86 in the paperback edition. Well, please keep me informed.

Thanks for a great article Tim – very insightful! I have been curious about the possibility of using a traditional publisher for the paperback version and self-publishing the e-book version – are such deals common (or even possible!)?

I agree that traditional publisher adds a lot of credibility to the product but am unconvinced that they have the digital marketing model sorted as yet… I feel I would be better off doing that bit myself.

Another good reason for the lag between finalizing and printing is the advance time needed for reviews by the big trade publications. Its a minimum 3-4 months before publication that places like Publishers Weekly want to see the galley copy of the book for review. So, the lag is all about marketing prior to release of the book.

“If your goal is to make money, I would just self-publish.” That’s exactly right. I tried the traditional publishing route for years without success so I finally decided to self-publish on Kindle and I’ve been selling thousands of Kindle books a month after quite a bit of studying and practice.

Wow! That is such a great article! I just self published my first ebook on Amazon and I think it’s the best option for where I am now but the insights in this article will prove very useful for the future!

Tim, I see that Borders has filed for bankruptcy and the New York Times now includes e-books on its bestseller list. Do these two changes since your original post make you recommend self-publishing now, or would you still recommend the publisher route for first-time authors who can obtain a respectable publisher?

Hello Tim, i am pleased to inform you that you happen to be just the best to give me the best hint about what happens in the publishing world. However, i am a new author whose first book is about to undergo a review, even after it has been printed and published, owing to the fact that the punctuation errors in the book dissatisfied me. My publishing company is Americastarbooks. I am just struglling with finance, and so do not have money for website, or to get an agent, or to convert it to an ebook, as my work is only in the format of paperback. So i want to know if the company can accept to helw me convert the book into an ebook, and when they make sales, they can deduct. Secondly, how best can i get an agent that will understand my poor status for now